Hong Kong developers, looking for a strong finish to the year on the back of new project launches, could see their hopes dashed, as analysts fear the market may be unable to fully absorb the new supply amid the possibility of a fourth wave of coronavirus outbreak that could pummel the city’s economy further.
Up to 11,578 new homes in 38 projects could be launched this quarter, according to developers’ websites and Lands Department reports of presale consent.
The likelihood of selling all these units, however, seems like a tall order given that only 10,041 new homes were sold in the first nine months, compared with 16,851 units in the same period last year, government data showed.
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“The market will see supply of some 11,000 flats in the fourth quarter as developers speed up the launch of new projects,” said Sammy Po, chief executive of Midland Realty’s residential division.
Po said that 3,067 units were sold in the fourth quarter last year, adding that even if the sales were to be doubled to 6,000 in the last three months of the year, nearly half of the stock will remain unsold.
The upcoming property launches could coincide with the new wave of coronavirus infections, deepening Hong Kong’s worst recession in decades, which in turn is expected to drive up the unemployment rate further. The city’s jobless rate stood at 6.1 per cent in August during the height of the third wave of coronavirus infections. Meanwhile, Hong Kong’s economy is expected to shrink 6 to 8 per cent this year, marking first back-to-back annual contractions since record-keeping began in 1961.
Hong Kong has already entered the fourth wave of coronavirus infections with an uptick in infection data, Ho Pak-leung, president of the Centre for Infection at the University of Hong Kong, told a local radio programme on Monday.
Ho added that cases could rise dramatically in a short time, especially during winter, which is seen as a high-risk period.
Among the new projects set for launch include New World Development’s 2,198-unit The Pavilia Farm project in Tai Wai in the New Territories. The developer plans to release at least 180 flats in the first batch, which has already received 7,000 registrations of intent as of Sunday.
“Those developments that are not priced correctly will struggle as buyers are still price-sensitive amid market uncertainties,” said Victoria Allan, founder and managing director of Habitat Property, adding that prices will be under pressure given the large supply pipeline.
Luxury home sales however “will perform better over time” because of limited supply and buyers want to “take advantage of perceived discounts and more flexibility in pricing compared to 12 to 18 months ago”, she added.
Thomas Lam, executive director at Knight Frank, however, was a bit cautious despite noticing that the recent release in the pent up purchasing power had translated into increased property sales.
“Amid the current economic winter, I worry whether such purchasing power can sustain until the end of this year. [We] particularly need to pay attention to whether any big companies will have large-scale lay-offs by the year-end,” said Lam.
More from South China Morning Post:
- New World Development launches mega Hong Kong project at lower-than-expected prices, as Covid-19, recession weigh on market
- Hong Kong homebuyers – spooked by recession, talk of national security law – forfeit US$1.5 million in deposits, walk away from purchases